What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-10 · 168 added, 226 removed, 369 unchanged (52% of the section changed)

3 unchanged sentences

(in thousands, except par value)

September 30,

Current assets:

1 unchanged sentence

Short-term investments

Accounts receivable, net of allowance for doubtful accounts of $ 890 as of September 30, 2022 and December 31, 2021

Accounts receivable, net of allowance for credit losses of $ 890 as of March 31, 2023 and December 31, 2022

Prepaid expenses and other current assets

16 unchanged sentences

Non-current portion of operating lease liabilities

Non-current portion of deferred revenues

Other non-current liabilities

Total liabilities

15 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Integrated Yield Ramp

6 unchanged sentences

Interest and other expense (income), net

Income (loss) before income taxes

Income (loss) before income tax expense

Income tax expense

3 unchanged sentences

Change in unrealized gain (loss) related to available-for-sale debt securities, net of tax

Total other comprehensive loss

Total other comprehensive income (loss)

Comprehensive income (loss)

5 unchanged sentences

(in thousands)

Three and Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Treasury Stock

6 unchanged sentences

Purchases of treasury stock in connection with tax withholdings on restricted stock grants

Repurchase of common stock

Stock-based compensation expense

Comprehensive loss

Comprehensive income

Balances, March 31, 2023

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

Purchases of treasury stock in connection with tax withholdings on restricted stock grants

Repurchase of common stock

Stock-based compensation expense

Comprehensive loss

Balances, June 30, 2022

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

Purchases of treasury stock in connection with tax withholdings on restricted stock grants

Stock-based compensation expense

Comprehensive income (loss)

Balances, September 30, 2022

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY – CONTINUED

(in thousands)

Three and Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Treasury Stock

2 unchanged sentences

Balances, December 31, 2021

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock in connection with employee stock purchase plans

Issuance of common stock in connection with exercise of options

5 unchanged sentences

Balances, March 31, 2022

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

Purchases of treasury stock in connection with tax withholdings on restricted stock grants

Stock-based compensation expense

Comprehensive income (loss)

Balances, June 30, 2021

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

Purchases of treasury stock in connection with tax withholdings on restricted stock grants

Stock-based compensation expense

Comprehensive loss

Balances, September 30, 2021

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

14 unchanged sentences

Operating lease liabilities

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

2 unchanged sentences

Purchases of property and equipment

Prepayment for the purchase of property and equipment

Purchases of intangible assets

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from exercise of stock options

Proceeds from employee stock purchase plan

Proceeds from employee stock purchase plans

Payments for taxes related to net share settlement of equity awards

2 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents

Net change in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheet:

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents, and restricted cash

Continued on next page.

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED

(in thousands)

Nine Months Ended September 30,

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

2 unchanged sentences

Supplemental disclosure of noncash information:

Property and equipment, and intangible assets received and accrued in accounts payable and accrued and other liabilities

Property and equipment received and accrued in accounts payable and accrued and other liabilities

Advances for purchase of fixed assets transferred from prepaid assets to property and equipment

Operating lease liabilities arising from obtaining right-of-use assets

Release of restricted cash reducing goodwill due to the acquisition purchase price adjustment

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

8 unchanged sentences

The operating results for any interim period are not necessarily indicative of the results that may be expected for other interim periods or the full fiscal year.

The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after the elimination of all intercompany balances and transactions.

The accompanying Condensed Consolidated Balance Sheet at December 31, 2021, has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The interim unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after the elimination of all intercompany balances and transactions.

The accompanying interim unaudited condensed consolidated balance sheet as of December 31, 2022, has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates in these financial statements include revenue recognition, the estimated useful lives of property and equipment and intangible assets, assumptions made in analysis of allowance for doubtful accounts, impairment of goodwill and long-lived assets, valuation for deferred tax assets, and accounting for lease obligations, stock-based compensation expense, and income tax uncertainties and contingencies.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates in these financial statements include revenue recognition, the estimated useful lives of property and equipment and intangible assets, assumptions made in analysis of allowance for credit losses, impairment of goodwill and long-lived assets, valuation for deferred tax assets, and accounting for lease obligations, stock-based compensation expense, and income tax uncertainties and contingencies.

Actual results could differ from those estimates and may result in material effects on the Company’s operating results and financial position.

The global COVID-19 pandemic (“COVID-19”) has impacted the operations and purchasing decisions of companies worldwide.

As of the date of issuance of the condensed consolidated financial statements, the Company is not aware of any specific event or circumstance relating to COVID-19 that would require updates to the Company’s estimates and judgments or revisions to the carrying value of its assets or liabilities.

These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known.

Actual results could differ from those estimates and any such differences may be material to the financial statements.

Recent Accounting Standards

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU No.

Accounting Standards Adopted

In June 2016, the Financial Accounting Standards Board (“FASB’) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts.

Measurement of Credit Losses on Financial Instruments (“ASU No.

2016-13”), which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts.

2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model, which will result in earlier recognition of credit losses.

1 unchanged sentence

2016-13, the FASB issued ASU No.

2018-19, Codification

Improvements to Topic 326, Financial Instruments – Credit Losses, ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU No.

2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instrument, ASU No.

3 unchanged sentences

2019-11 Codification Improvements to Topic 326, Financial Instruments-Credit Losses.

The subsequent ASUs do not change the core principle of the guidance in ASU No.

The subsequent ASUs do not change the core principle of the guidance in

Instead, these amendments are intended to clarify and improve operability of certain topics included within ASU No.

Additionally, ASU No.

2019-10 defers the effective date for the adoption of the new standard on credit losses for public filers that are considered small reporting companies (“SRC”) as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which will be fiscal 2023 for the Company.

In February 2020, the FASB issued ASU 2020-02, which provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses.

The subsequent amendments will have the same effective date and transition requirements as ASU No.

Topic 326 requires a modified retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.

While the Company is currently evaluating the impact of Topic 326, the Company does not expect the adoption of this ASU to have a material impact on its condensed consolidated financial statements or the related disclosure.

The Company adopted this standard on January 1, 2023, using a modified retrospective approach, which requires a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption with prior periods not restated.

The adoption of ASU No.

2016-13 did not have a material impact on the Company’s condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

Management has reviewed other recently issued accounting pronouncements issued or proposed by the FASB, and does not believe any of these accounting pronouncements has had or will have a material impact on the condensed consolidated financial statements.

2 unchanged sentences

Analytics revenue and Integrated Yield Ramp revenue.

The Company recognizes revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers , and its related amendments (collectively known as “ASC 606”).

The Company recognizes revenue in accordance with FASB Accounting Standards Codification Topic 606, Revenue from Contracts with Customers , and its related amendments (collectively known as “ASC 606”).

ASC 606 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers.

6 unchanged sentences

● Recognition of revenue when, or as, performance obligations are satisfied

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

Contracts with multiple performance obligations

3 unchanged sentences

Analytics revenue is derived from the following primary offerings:

licenses and services for standalone software (which is primarily Exensio ® and Cimetrix ® products), software-as-a-service (“SaaS”) (which is primarily Exensio ® products), and DFI™ systems and CV ® systems that do not include performance incentives based on customers’ yield achievement.

licenses and services for standalone software (which is primarily Exensio ® and Cimetrix ® products), software-as-a-service (“SaaS”) (which is primarily Exensio ® products), and Design-for-Inspection™ (“DFI™”) systems and Characterization Vehicle ® (“CV ® ) systems that do not include performance incentives based on customers’ yield achievement.

Revenue from standalone software is recognized depending on whether the license is perpetual or time-based.

Perpetual (one-time charge) license software is recognized at the time of the inception of the arrangement when control transfers to the customers if the software license is considered as a separate performance obligation from the services offered by the Company.

Revenue from post-contract support is recognized over the contract term on a straight-line basis, because we are providing (i) support and (ii) unspecified software updates on a when-and-if available basis over the contract term.

Revenue from post-contract support is recognized over the contract term on a straight-line basis, because the Company is providing (i) support and (ii) unspecified software updates on a when-and-if available basis over the contract term.

Revenue from time-based-licensed software is allocated to each performance obligation and is recognized either at a point in time or over time as follows.

1 unchanged sentence

For contracts with any combination of licenses, support, and other services, distinct performance obligations are accounted for separately.

For contracts with multiple performance obligations, we allocate the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation.

For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation.

Revenue from SaaS arrangements, which allow for the use of a cloud-based software product or service over a contractually determined period of time without the customer having to take possession of software, is accounted for as a subscription and is recognized as revenue ratably, on a straight-line basis, over the subscription period beginning on the date the service is first made available to customers.

For contracts with any combination of SaaS and related services, distinct performance obligations are accounted for separately.

Revenue from DFI systems and CV systems that do not include performance incentives based on customers’ yield achievement is recognized primarily as services are performed.

Revenue from DFI systems and CV systems (including Characterization services) that do not include performance incentives based on customers’ yield achievement is recognized primarily as services are performed.

Where there are distinct performance obligations, the Company allocates revenue to all deliverables based on their SSPs.

5 unchanged sentences

Integrated Yield Ramp revenue is derived from the Company’s fixed-fee engagements that include performance incentives based on customers’ yield achievement (which consists primarily of Gainshare royalties) typically based on customer’s wafer shipments, pertaining to these fixed-price contracts, which royalties are variable.

Revenue under these project-based contracts, which are delivered over a specific period of time, typically for a fixed fee component paid on a set schedule, is recognized as services are performed using a percentage of completion method based on costs or labor-inputs, whichever is the most appropriate measure of the progress towards completion of the contract.

Revenue under these project-based contracts, which are delivered over a specific period of time, typically for a fixed fee component paid on a set schedule, is recognized as services are performed using a percentage of completion method based on costs or labor-hours inputs, whichever is the most appropriate measure of the progress towards completion of the contract.

Where there are distinct performance obligations, the Company allocates revenue to all deliverables based on their SSPs and allocates the transaction price of the contract to each performance obligation on a relative basis using SSP.

1 unchanged sentence

Please refer to the “Significant Judgments” section of this Note for further discussion.

The Gainshare royalty contained in Integrated Yield Ramp contracts is a variable fee related to continued usage of the Company’s intellectual property after the fixed-fee service period ends, based on a customer’s yield achievement.

The Gainshare contained in Integrated Yield Ramp contracts is a variable fee related to continued usage of the Company’s intellectual property after the fixed-fee service period ends, based on a customer’s yield achievement.

Revenue derived from Gainshare is contingent upon the Company’s customers reaching certain defined production yield levels.

Gainshare royalty periods are generally subsequent to the delivery of all contractual services and performance obligations.

Gainshare periods are generally subsequent to the delivery of all contractual services and performance obligations.

The Company records Gainshare as a usage-based royalty derived from customers’ usage of intellectual property and records it in the same period in which the usage occurs.

4 unchanged sentences

The following table represents a disaggregation of revenue percentage by timing of revenue:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Point-in-time

International revenues accounted for approximately 54 % and 51 % of our total revenues during the three and nine months ended September 30, 2022, respectively, compared to 53 % and 57 % of our total revenues during the three and nine months ended September 30, 2021, respectively.

International revenues accounted for approximately 43 % and 48 % of the Company’s total revenues during the three months ended March 31, 2023 and 2022, respectively.

See Note 10, Customer and Geographic Information .

7 unchanged sentences

These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in revenue on a cumulative catch-up basis in the period in which the circumstances that gave rise to the revision become known.

The Company’s contracts with customers often include promises to transfer products, licenses software and provide services, including professional services, technical support services, and rights to unspecified updates to a customer.

The Company’s contracts with customers often include promises to transfer products, software licenses and provide services, including professional services, technical support services, and rights to unspecified updates to a customer.

Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment.

1 unchanged sentence

In instances where SSP is not directly observable because the Company does not license the software or sell the service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The Company is required to record Gainshare royalty revenue in the same period in which the usage occurs.

The Company is required to record Gainshare revenue in the same period in which the usage occurs.

Because the Company generally does not receive the acknowledgment reports from its customers during a given quarter within the time frame necessary to adequately review the reports and include the actual amounts in quarterly results for such quarter, the Company accrues the related revenue based on estimates of customers underlying sales achievement.

8 unchanged sentences

The contract assets are generally classified as current and are recorded on a net basis with deferred revenue (i.e., contract liabilities) at the contract level.

At September 30, 2022 and December 31, 2021, the total contract assets included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets were $ 1.9 million and $ 0.4 million, respectively.

As of March 31, 2023 and December 31, 2022, the total contract assets included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets were $ 2.9 million and $ 3.3 million, respectively.

The Company did no t record any asset impairment charges related to contract assets for the periods presented.

Deferred revenues and billings in excess of recognized revenues consist substantially of amounts invoiced in advance of revenue recognition and are recognized as the revenue recognition criteria are met.

Deferred revenues that will be recognized during the succeeding twelve-month period are recorded as current deferred revenues and the remaining portion is recorded as non-current deferred revenues in the accompanying Condensed Consolidated Balance Sheets.

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each reporting period was $ 10.6 million and $ 7.0 million during the three months ended September 30, 2022 and 2021, respectively, and $ 16.3 million and $ 13.8 million during the nine months ended September 30, 2022 and 2021, respectively.

At September 30, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied was approximately $ 185.4 million.

Given the applicable contract terms with customers, the majority of this amount is expected to be recognized as revenue over the next two years , with the remainder in the following three years .

This amount does not include insignificant contracts to which the customer is not committed, nor significant contracts for which we recognize revenue equal to the amount we have the right to invoice for services performed, or future sales-based or usage-based royalty payments in exchange for a license of intellectual property.

Deferred revenues that will be recognized during the succeeding twelve-month period are recorded as current deferred revenues and the remaining portion is recorded in other non-current liabilities in the accompanying condensed consolidated balance sheets.

As of March 31, 2023, and December 31, 2022, the non-current portion of deferred revenues included in non-current liabilities was $ 2.3 million and $ 1.9 million, respectively.

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each reporting period was $ 11.4 million and $ 6.9 million during the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied was approximately $ 261.2 million.

Given the applicable contract terms with customers, more than half of this amount is expected to be recognized as revenue over the next two years with the remainder to be recognized thereafter.

This amount does not include insignificant contracts to which the customer is not committed, nor significant contracts for which the Company recognizes revenue equal to the amount the Company has the right to invoice for services performed, or future sales-based or usage-based royalty payments in exchange for a license of intellectual property.

This amount is subject to change due to future revaluations of variable consideration, terminations, other contract modifications, or currency adjustments.

The estimated timing of the recognition of remaining unsatisfied performance obligations is subject to change and is affected by changes to the scope, change in timing of delivery of products and services, or contract modifications.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was an increase of $ 1.9 million and a decrease of $ 0.2 million during the three months ended September 30, 2022 and 2021, respectively, and an increase of $ 0.4 million and $ 34,000 during the nine months ended September 30, 2022 and 2021, respectively.

These amounts primarily represent changes in estimated percentage-of-completion based contracts and changes in actual versus estimated Gainshare royalty.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was an increase of $ 2.5 million and an increase of $ 0.2 million during the three months ended March 31, 2023, and 2022, respectively.

These amounts primarily represent changes in estimated percentage-of-completion based contracts and changes in actual versus estimated Gainshare.

Costs to obtain or fulfill a contract

1 unchanged sentence

Amortization expense related to these capitalized costs is recognized over the period associated with the revenue from which the cost was incurred.

Total capitalized direct sales commission costs included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021, were $ 1.4 million and $ 0.6 million, respectively.

Total capitalized direct sales commission costs included in other non-current assets in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021, were $ 1.7 million and $ 2.1 million, respectively.

Amortization of these assets were $ 0.4 million and $ 0.2 million during the three months ended September 30, 2022 and 2021, respectively, and $ 1.1 million and $ 0.5 million during the nine months ended September 30, 2022 and 2021, respectively.

Total capitalized direct sales commission costs included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets as of March 31, 2023, and December 31, 2022, were $ 1.8 million and $ 1.7 million, respectively.

Total capitalized direct sales commission costs included in other non-current assets in the accompanying condensed consolidated balance sheets as of March 31, 2023, and December 31, 2022, were $ 3.2 million and $ 2.1 million, respectively.

Amortization of these assets was $ 0.5 million and $ 0.2 million during the three months ended March 31, 2023 and 2022, respectively.

There was no impairment loss in relation to the costs capitalized for the periods presented.

1 unchanged sentence

The Company does not adjust the transaction price for the effects of a significant financing component when the period between the transfers of the promised good or service to the customer and payment for that good or service by the customer is expected to be one year or less.

The Company assessed each of its revenue generating arrangements in order to determine whether a significant financing component exists, and determined its contracts did not include a significant financing component during the three and nine months ended September 30, 2022 and 2021.

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

On July 29, 2020, the Company entered into a long-term strategic partnership with Advantest Corporation through its wholly-owned subsidiary, Advantest America, Inc.

(collectively referred to herein as “Advantest”) that included the following agreements.

(collectively referred to herein as “Advantest”) that included the following agreements, which were all negotiated on arm’s length basis with commercial customary terms.

● A Securities Purchase Agreement for the purchase by Advantest of an aggregate of 3,306,924 shares of the Company’s common stock for aggregate gross proceeds of $ 65.2 million and a related Stockholder Agreement.

● An Amendment #1 to that certain Software License and Related Services Agreement, dated as of March 25, 2020, for an exclusive commercial arrangement in which the Company and Advantest collaborate on, and the Company initially hosts, develops and maintains, an Advantest-specific cloud layer on the Exensio platform.

On June 5, 2022, the parties amended Amendment #1 to provide another approved DEX Site (as defined therein).

On June 5, 2022, the parties amended Amendment #1 to provide another approved Data Exchange Network (DEX) Site (as defined therein).

On November 11, 2022, the parties entered into a further amendment to Amendment #1 that provided, effective October 31, 2022:

(i) flexibility for Advantest to spend the remainder of their committed $ 50.0 million over the remainder of the original term on its choice of products and services from a price list, instead of limiting Advantest to the original, fixed bundle of software and services;

(ii) revised exclusivity;

and (iii) the Company with free access/use of certain Advantest software.

● An Amended and Restated Master Development Agreement with Advantest, pursuant to which the Company and Advantest agreed to collaborate on extensions to or combinations of both of their existing technology and new technology to address mutual customers’ needs through one or more development phases subject to certain conditions as set forth therein.

Costs and expenses incurred related to this agreement have not been significant for the three and nine months ended September 30, 2022 and 2021.

Costs and expenses incurred related to this agreement were not significant for the three months ended March 31, 2023 and 2022.

● A Master Commercial Terms and Support Services Agreement for the commercialization and support of integrated products of the Company and Advantest that are the outcome of the above development agreement.

No material costs and expenses were incurred related to the Commercial Agreement with Advantest during the three and nine months ended September 30, 2022 and 2021.

Analytics revenue recognized from Advantest was $ 2.8 million and $ 8.1 million during the three and nine months ended September 30, 2022, respectively, compared to $ 2.7 million and $ 7.9 million during the three and nine months ended September 30, 2021, respectively.

Accounts receivable from Advantest amounted to $ 10.4 million as of September 30, 2022, and nil as of December 31, 2021, and deferred revenue amounted to $ 9.1 million and $ 6.8 million as of September 30, 2022 and December 31, 2021, respectively.

No material costs and expenses were incurred related to the Commercial Agreement with Advantest during the three months ended March 31, 2023 and 2022.

Analytics revenue recognized from Advantest was $ 1.8 million and $ 2.6 million during the three months ended March 31, 2023 and 2022, respectively.

There were no outstanding accounts receivable from Advantest as of March 31, 2023.

Accounts receivable from Advantest amounted to $ 0.3 million as of December 31, 2022.

Deferred revenue amounted to $ 5.9 million and $ 7.1 million as of March 31, 2023, and December 31, 2022, respectively.

There was no occurrence of any termination events under these agreements as of the issuance of these condensed consolidated financial statements.

The Company carries out transactions with Advantest on arm’s length commercial customary terms.

BALANCE SHEET COMPONENTS

1 unchanged sentence

Accounts receivable include amounts that are unbilled at the end of the period that are expected to be billed and collected within a 12-month period.

Unbilled accounts receivable, included in accounts receivable, totaled $ 9.8 million and $ 11.8 million as of September 30, 2022, and December 31, 2021, respectively.

Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12-month period is recorded in other non-current assets and totaled $ 1.0 million and $ 1.3 million as of September 30, 2022, and December 31, 2021, respectively.

Unbilled accounts receivable, included in accounts receivable, totaled $ 16.1 million and $ 13.5 million as of March 31, 2023, and December 31, 2022, respectively.

Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12-month period is recorded in other non-current assets and totaled $ 0.7 million and $ 0.8 million as of March 31, 2023, and December 31, 2022, respectively.

The Company performs ongoing credit evaluations of its customers’ financial condition.

An allowance for doubtful accounts is maintained for probable credit losses based upon the Company’s assessment of the expected collectability of the accounts receivable.

The allowance for doubtful accounts is reviewed on a quarterly basis to assess the adequacy of the allowance.

An allowance for credit losses is maintained for probable credit losses based upon the Company’s assessment of the expected collectability of the accounts receivable.

The allowance for credit losses is reviewed on a quarterly basis to assess the adequacy of the allowance.

Property and equipment

Property and equipment, net consist of the following (in thousands):

September 30,

Computer equipment

3 unchanged sentences

Test equipment

Construction-in-progress

Property and equipment in progress:

DFI™ system assets

CV® system and other assets

Accumulated depreciation and amortization

Test equipment mainly includes DFI™ systems and CV ® systems assets at customer sites that are contributing to revenue.

Among assets under construction, the construction-in-progress balance related to construction of DFI™ systems assets amounted to $ 20.1 million and $ 20.0 million as of September 30, 2022, and December 31, 2021, respectively.

Depreciation and amortization expense was $ 1.4 million and $ 1.5 million during the three months ended September 30, 2022 and 2021, respectively, and $ 4.2 million and $ 4.8 million during the nine months ended September 30, 2022 and 2021, respectively.

In the fourth quarter of 2021, the Company wrote down the value of its property and equipment by $ 3.2 million related to its first-generation of e-beam tools for DFI™ systems wherein carrying values may not be fully recoverable due to lack of market demand and future needs of our customers for these tools.

Test equipment mainly includes DFI™ system and CV ® system assets at customer sites that are contributing to revenue.

Property and equipment in progress represent the development or construction of property and equipment that have not yet been placed in service for the Company’s intended use and are not depreciated.

Depreciation and amortization expense was $ 1.3 million and $ 1.4 million during the three months ended March 31, 2023 and 2022, respectively.

Goodwill and Intangible Assets, Net

As of September 30, 2022, and December 31, 2021, the carrying amount of goodwill was $ 14.1 million.

As of March 31, 2023, and December 31, 2022, the carrying amount of goodwill was $ 14.1 million.

Intangible assets, net, consisted of the following (in thousands):

September 30, 2022

March 31, 2023

December 31, 2022

4 unchanged sentences

Noncompetition agreements

The weighted average amortization period for acquired identifiable intangible assets was 6.1 years as of September 30, 2022.

The weighted average amortization period for acquired identifiable intangible assets was 5.7 years as of March 31, 2023.

The following table summarizes intangible assets amortization expense in the accompanying condensed consolidated statements of comprehensive income (loss) (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Amortization of acquired technology included under Costs of Revenues

3 unchanged sentences

Year Ending December 31,

2022 (remaining three months)

2023 (remaining nine months)

2028 and thereafter

Total future amortization expense

There were no impairment charges for goodwill and intangible assets during the three and nine months ended September 30, 2 0 22 and 2021.

There were no impairment charges for goodwill and intangible assets during the three months ended March 31, 2 0 23 and 2022.

The Company leases administrative and sales offices and certain equipment under non-cancellable operating leases, which contain various renewal options and, in some cases, require payment of common area costs, taxes and utilities.

These operating leases expire at various dates through 2028.

The Company had no leases that were classified as a financing lease as of September 30, 2022, and December 31, 2021.

The Company had no leases that were classified as a financing lease as of March 31, 2023, and December 31, 2022.

In the first quarter of 2022, the Company early terminated an office lease contract.

The termination of this lease reduced the Company’s operating lease right-of-use assets and lease liabilities by approximately $ 0.5 million and $ 0.6 million, respectively.

The gain from the lease termination of approximately $ 0.1 million was recorded under selling, general and administrative expense in the accompanying Condensed Consolidated Statement of Comprehensive Income (Loss) for the nine months ended September 30, 2022.

The gain from the lease termination of approximately $ 0.1 million was recorded under selling, general, and administrative expense in the accompanying condensed consolidated statement of comprehensive income (loss) for the three months ended March 31, 2022.

Lease expense was comprised of the following (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating lease expense (1)

1 unchanged sentence

Total lease expense

(1) Net of gain recognized upon lease termination of $ 0.1 million in the nine months ended September 30, 2022.

(1) Net of gain recognized upon lease termination of $ 0.1 million in the three months ended March 31, 2022.

(2) Leases with an initial term of 12 months or less are not recorded on the accompanying condensed consolidated balance sheets, and the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

1 unchanged sentence

Supplemental condensed consolidated balance sheets information related to operating leases was as follows:

September 30,

Weighted average remaining lease term under operating ROU leases (in years)

Weighted average remaining lease term under operating leases (in years)

Weighted average discount rate for operating lease liabilities

Maturities of operating lease liabilities as of September 30, 2022, were as follows (in thousands):

Maturities of operating lease liabilities as of March 31, 2023, were as follows (in thousands):

Year Ending December 31,

2022 (remaining three months)

2023 (remaining nine months)

2028 and thereafter

1 unchanged sentence

Present value of future minimum lease payments under operating lease liabilities (3)

(1) As of September 30, 2022, the total operating lease liability includes approximately $ 0.9 million related to an option to extend a lease term that is reasonably certain to be exercised.

(1) As of March 31, 2023, the total operating lease liability includes approximately $ 0.9 million related to an option to extend a lease term that is reasonably certain to be exercised.

(2) Calculated using incremental borrowing interest rate for each lease.

(3) Includes the current portion of operating lease liabilities of $ 1.4 million as of September 30, 2022.

(3) Includes the current portion of operating lease liabilities of $ 1.6 million as of March 31, 2023.

STOCKHOLDERS’ EQUITY

1 unchanged sentence

On June 4, 2020, the Company’s Board of Directors adopted a stock repurchase program (the “2020 Program”) to repurchase up to $ 25.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, over the next two years .

During the nine months ended September 30, 2022, the Company repurchased 218,858 shares under the 2020 Program at an average price of $ 26.40 per share for an aggregate total price of $ 5.8 million.

During the nine months ended September 30, 2021, the Company repurchased 251,212 shares under the 2020 Program at an average price of $ 18.01 per share for an aggregate total price of $ 4.5 million.

Through April 10, 2022, 470,070 shares had been repurchased under the 2020 Program at an average price of $ 21.91 per share, for an aggregate total price of $ 10.3 million.

On April 11, 2022, the Board of Directors terminated the 2020 Program, and adopted a new program (the “2022 Program”) to repurchase up to $ 35.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, from time to time, over the next two year s.

During the nine months ended September 30, 2022, the Company repurchased 714,600 shares under the 2022 Program at an average price of $ 23.36 per share for an aggregate total price of $ 16.7 million.

During the three months ended March 31, 2022, 218,858 shares were repurchased by the Company under the 2020 Program at an average price of $ 26.40 per share for an aggregate total price of $ 5.8 million.

In total, 470,070 shares were repurchased under the 2020 Program at an average price of $ 21.91 per share, for an aggregate total price of $ 10.3 million.

In total, the Company has repurchased 714,600 shares under the 2022 Program at an average price of $ 23.36 per share for an aggregate total price of $ 16.7 million.

EMPLOYEE BENEFIT PLANS

On September 30, 2022, the Company had the following stock-based compensation plans:

On March 31, 2023, the Company had the following stock-based compensation plans:

Employee Stock Purchase Plan

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The 2010 Purchase Plan provided for twenty-four-month offering periods with four six-month purchase periods in each offering period.

The 2010 Purchase Plan expired on May 17, 2020.

The 2010 Purchase Plan

expired on May 17, 2020.

Existing offering periods under the 2010 Plan continued through the applicable expiration date and the final offering period expired on January 31, 2022.

On June 15, 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase Plan, which has a ten-year term (the “2021 Purchase Plan” and, together with the 2010 Purchase Plan, the “Employee Purchase Plans”).

The terms of 2021 Purchase Plan are substantially similar to those of the 2010 Purchase Plan.

The terms of the 2021 Purchase Plan are substantially similar to those of the 2010 Purchase Plan.

A twenty-four-month offering period under the 2021 Purchase Plan commenced on August 1, 2021.

The Company estimated the fair value of purchase rights granted under the 2021 Purchase Plan during the period using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions, resulting in the following weighted average fair values:

Nine Months Ended September 30,

Three Months Ended March 31,

Expected life (in years)

2 unchanged sentences

Weighted average fair value of purchase rights granted during the period

During the three months ended September 30, 2022, a total of 92,043 shares were issued under the 2021 Purchase Plan, at a weighted-average purchase price of $ 16.40 per share.

During the nine months ended September 30, 2022, a total of 182,083 shares were issued under the 2021 Purchase Plan, at a weighted-average purchase price of $ 16.15 per share.

During the nine months ended September 30, 2022 and 2021, a total of 5,203 and 108,623 shares, respectively, were issued under the 2010 Purchase Plan, at a weighted-average purchase price of $13.40 per share and $ 9.53 per share, respectively.

As of September 30, 2022, unrecognized compensation cost related to the 2021 Purchase Plan was $ 1.6 million.

During the three months ended March 31, 2023, a total of 98,216 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 16.93 per share.

During the three months ended March 31, 2022, a total of 90,040 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 15.90 per share.

During the three months ended March 31, 2022, a total of 5,203 shares were issued under the 2010 Purchase Plan, at a weighted average purchase price of $ 13.40 per share.

As of March 31, 2023, unrecognized compensation cost related to the 2021 Purchase Plan was $ 1.0 million.

This estimated unrecognized cost is expected to be recognized over a weighted average period of 1.1 years.

There was no unrecognized compensation cost related to the 2010 Purchase Plan as of September 30, 2022.

As of September 30, 2022, 817,917 shares were available for future issuance under the 2021 Purchase Plan.

As of March 31, 2023, 719,701 shares were available for future issuance under the 2021 Purchase Plan.

Stock Incentive Plans

On November 16, 2011, the Company’s stockholders initially approved the 2011 Stock Incentive Plan, which has been amended and restated and approved by the Company’s stockholders a number of times since then (as amended, the “2011 Plan”).

Under the 2011 Plan, the Company may award stock options, stock appreciation rights (“SARs”), stock grants or stock units covering shares of the Company’s common stock to employees, directors, non-employee directors and contractors.

The aggregate number of shares reserved for awards under the 2011 Plan is 12,800,000 shares, plus up to 3,500,000 shares previously issued under the 2001 Stock Plan adopted by the Company in 2001, which expired in 2011 (the “2001 Plan”) that are either (i) forfeited or (ii) repurchased by the Company or are shares subject to awards previously issued under the 2001 Plan that expire or that terminate without having been exercised or settled in full on or after November 16, 2011.

The aggregate number of shares reserved for awards under the 2011 Plan is 12.8 million shares, plus up to 3.5 million shares previously issued under the 2001 Stock Plan adopted by the Company in 2001, which expired in 2011 (the “2001 Plan”) that are either (i) forfeited or (ii) repurchased by the Company or are shares subject to awards previously issued under the 2001 Plan that expire or that terminate without having been exercised or settled in full on or after November 16, 2011.

In case of awards other than options or SARs, the aggregate number of shares reserved under the 2011 Plan will be decreased at a rate of 1.33 shares issued pursuant to such awards.

1 unchanged sentence

Stock options generally expire ten years from the date of grant and become vested and exercisable over a four-year period.

As of September 30, 2022, 13.3 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.5 million shares were available for future grant.

The number of shares reserved and available under the 2011 Plan includes 0.5 million shares that were subject to awards previously made under the 2001 Plan and were forfeited, expired or repurchased by the Company after the adoption of the 2011 Plan through September 30, 2022.

As of September 30, 2022, there were no outstanding awards that had been granted outside of the 2011 or 2001 Plans (collectively, the “Stock Plans”).

On April 24, 2023, the Company’s Board of Directors approved another amendment and restatement of the 2011 Plan, which is subject to stockholder approval at the 2023 annual meeting of stockholders, to, among other things, increase the number of shares reserved for awards under it to a total of 13.8 million shares, which is an increase of an additional 1.0 million shares, and to extend the expiration to 2031.

As of March 31, 2023, 13.3 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.6 million shares were available for future grant.

As of March 31, 2023, there were no outstanding awards that had been granted outside of the 2011 or 2001 Plans (collectively, the “Stock Plans”).

The Company estimated the fair value of share-based awards granted under the 2011 Stock Plan during the period using the Black-Scholes-Merton option-pricing model.

There were no stock options granted during the three and nine months ended September 30, 2022 and 2021.

There were no stock options granted during the three months ended March 31, 2023 and 2022.

Stock-Based Compensation

1 unchanged sentence

Stock-based compensation expense before taxes related to the Company’s stock plans and employee stock purchase plans was allocated as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Costs of revenues

2 unchanged sentences

Stock-based compensation expenses

Additional information with respect to options under the Stock Plans during the nine months ended September 30, 2022, is as follows:

Additional information with respect to options under the Stock Plans during the three months ended March 31, 2023, is as follows:

Outstanding Options

(in thousands)

Outstanding, January 1, 2022

Outstanding, September 30, 2022

Vested and expected to vest, September 30, 2022

Exercisable, September 30, 2022

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 24.53 per share as of September 30, 2022.

The total intrinsic value of options exercised was $ 1.8 million during the nine months ended September 30, 2022.

As of September 30, 2022, there was $ 0.1 million of total unrecognized compensation cost, net of forfeiture, related to unvested stock options, which is expected to be recognized over a weighted average period of 1.2 years.

The total fair value of shares vested was immaterial during the nine months ended September 30, 2022.

Nonvested restricted stock unit activity during the nine months ended September 30, 2022, was as follows:

Outstanding, December 31, 2022

Outstanding, March 31, 2023

Vested and expected to vest, March 31, 2023

Exercisable, March 31, 2023

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 42.40 per share as of March 31, 2023.

The total intrinsic value of options exercised was $ 0.4 million during the three months ended March 31, 2023.

Total remaining unrecognized compensation cost related to unvested stock options as of March 31, 2023, which is expected to be fully recognized in 2023, and total fair value of shares vested during the three months ended March 31, 2023 were immaterial.

Nonvested restricted stock unit activity during the three months ended March 31, 2023, was as follows:

Average Grant

1 unchanged sentence

(in thousands)

Nonvested, January 1, 2022

Nonvested, September 30, 2022

As of September 30, 2022, there was $ 35.0 million of total unrecognized compensation cost related to restricted stock units.

Nonvested, December 31, 2022

Nonvested, March 31, 2023

As of March 31, 2023, there was $ 30.2 million of total unrecognized compensation cost related to restricted stock units.

That cost is expected to be recognized over a weighted average period of 2.5 years.

Restricted stock units do not have rights to dividends prior to vesting.

Income tax expense increased by $ 1.8 million for the nine months ended September 30, 2022, to a $ 3.3 million income tax expense as compared to $ 1.5 million for the nine months ended September 30, 2021.

The Company’s effective tax rate expense was ( 547.7 %) and ( 12.0 %) for the nine months ended September 30, 2022 and 2021, respectively.

The Company’s effective tax rate expense increased in the nine months ended September 30, 2022, as compared to the same period in 2021, primarily due to increases in foreign withholding taxes and changes in the geographic mix of worldwide income, which is subject to taxation at different statutory tax rates.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of September 30, 2022, was $ 15.2 million, of which $ 1.8 million, if recognized, would affect the Company’s effective tax rate.

Income tax expense decreased by $ 0.8 million for the three months ended March 31, 2023, to a $ 0.4 million income tax expense as compared to $ 1.2 million for the three months ended March 31, 2022.

The Company’s effective tax rate expense was 52 % and ( 40.0 %) for the three months ended March 31, 2023 and 2022, respectively.

The Company’s effective tax rate increased in the three months ended March 31, 2023, as compared to the same period in 2022, primarily due to increases in foreign taxes and changes in the year-to-date recognition of worldwide income.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of March 31, 2023, was $ 15.2 million, of which $ 2.0 million, if recognized, would affect the Company’s effective tax rate.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of December 31, 2022, was $ 15.1 million, of which $ 2.0 million, if recognized, would affect the Company’s effective tax rate.

As of September 30, 2022, the Company has recorded unrecognized tax benefits of $ 2.3 million, including interest and penalties of $ 0.6 million, as long-term taxes payable in the accompanying Condensed Consolidated Balance Sheet.

The remaining $ 13.5 million has been recorded net of the Company’s deferred tax assets (“DTAs”), which is subject to a full valuation allowance.

The valuation allowance was approximately $ 51.6 million as of September 30, 2022, and December 31, 2021, which was related to U.S.

As of March 31, 2023, the Company has recorded unrecognized tax benefits of $ 2.6 million, including interest and penalties of $ 0.7 million, as long-term taxes payable in the accompanying condensed consolidated balance sheet.

The remaining $ 13.2 million has been recorded within the Company’s deferred tax assets (“DTAs”), which is subject to a full valuation allowance.

The valuation allowance was approximately $ 59.2 million as of March 31, 2023, and December 31, 2022, which was related to U.S.

net federal and state DTAs.

The worldwide net deferred tax assets balance as of September 30, 2022, and December 31, 2021 were not significant.

The worldwide net deferred tax assets balance as of March 31, 2023, and December 31, 2022, were not significant.

The Company conducts business globally and, as a result, files numerous consolidated and separate income tax returns in the U.S.

federal, various state and foreign jurisdictions.

federal and California income tax purposes, the statute of limitations currently remains open for the tax years ending 2018 to present and 2017 to present, respectively.

federal and various state and foreign jurisdictions.

federal and California income tax purposes, the statute of limitations currently remains open for the tax years ended 2019 to present and 2018 to present, respectively.

In addition, due to net operating loss carryback claims, the tax years 2013 through 2015 may be subject to federal examination and all of the net operating loss and research and development credit carryforwards that may be utilized in future years may be subject to federal and state examination.

2 unchanged sentences

Basic net income (loss) per share is computed by dividing net income (loss) by weighted average number of common shares outstanding for the period (excluding outstanding stock options and shares subject to repurchase).

Diluted net income (loss) per share is computed using the weighted-average number of common shares outstanding for the period plus the potential effect of dilutive securities which are convertible into common shares (using the treasury stock method), except in cases in which the effect would be anti-dilutive.

Diluted net income (loss) per share is computed using the weighted average number of common shares outstanding for the period plus the potential effect of dilutive securities which are convertible into common shares (using the treasury stock method), except in cases in

which the effect would be anti-dilutive.

The following is a reconciliation of the numerators and denominators used in computing basic and diluted net income (loss) per share (in thousands except per share amount):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Net income (loss)

Basic weighted average shares outstanding

Effect of dilutive options and restricted stock units

Effect of dilutive stock options, unvested restricted stock units, and shares of common stock expected to be issued under Employee Purchase Plans

Diluted weighted average shares outstanding

Net income (loss) per share – Basic

Net income (loss) per share – Diluted

For the nine months ended September 30, 2022 and for the three and nine months ended 2021, because the Company was in a loss position, basic net loss per share is the same as diluted net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

Net income (loss) per share:

For the three months ended March 31, 2022, because the Company was in a loss position, basic net loss per share is the same as diluted net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

The following table sets forth potential shares of common stock that were not included in the diluted net income (loss) per share calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Outstanding options

Nonvested restricted stock units

Non-vested restricted stock units

Employee Stock Purchase Plan

3 unchanged sentences

Accordingly, the Company considers itself to be in one operating and reporting segment, specifically the provision of services for differentiated data and analytics solutions to the semiconductor and electronics industries.

The Company had revenues from individual customers that are approximately 10% or more of the Company’s consolidated total revenues as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

* represents less than 10%

Gross accounts receivable balances (including amounts that are unbilled) from individual customers that are approximately 10% or more of the Company’s gross accounts receivable balance as follows:

September 30,

Revenues from an individual customer that are approximately 10 % or more of the Company’s consolidated total revenues are as follows:

Three Months Ended March 31,

Gross accounts receivable balances (including amounts that are unbilled) from individual customers that are approximately 10 % or more of the Company’s gross accounts receivable balance are as follows:

* represents less than 10%

Revenues from customers by geographic area based on the location of the customers’ work sites are as follows (amounts in thousands):

Three Months Ended September 30,

United States

Rest of the world

Total revenue

Nine Months Ended September 30,

Three Months Ended March 31,

United States

2 unchanged sentences

Long-lived assets, net by geographic area are as follows (in thousands):

September 30,

United States (1)

11 unchanged sentences

Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following table represents the Company’s assets measured at fair value on a recurring basis as of September 30, 2022, and December 31, 2021, and the basis for those measurements (in thousands):

The following table represents the Company’s assets measured at fair value on a recurring basis as of March 31, 2023, and December 31, 2022, and the basis for those measurements (in thousands):

Fair Value Measurements Using

September 30,

Inputs (Level 3)

7 unchanged sentences

Money market mutual funds

Government securities (1)

Short-term investments (available-for-sale debt securities)

Government securities (1)

(1) As of September 30, 2022, and December 31, 2021, the amortized cost of the Company’s investments in U.S Government securities approximated their fair value due to their short-term maturities, and there have been no events or changes in circumstances that would have had a significant effect on the fair value of these securities in the periods presented.

There was no material realized or unrealized gains or losses, either individually or in the aggregate.

(1) As of March 31, 2023, and December 31, 2022, the amortized cost of the Company’s investments in U.S Government securities approximated their fair value due to their short-term maturities, and there have been no events or changes in circumstances that would have had a significant effect on the fair value of these securities in the periods presented.

For the three months ended March 31, 2023, there were no material realized or unrealized gains or losses, either individually or in the aggregate.

COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

The Company is unable to estimate the maximum potential impact of these guarantees on its future results of operations.

Purchase Obligations — The Company has purchase obligations with certain suppliers for the purchase of goods and services entered in the ordinary course of business.

As of September 30, 2022, total outstanding purchase obligations were $ 13.7 million, the majority of which is due within the next 12 months .

Purchase Obligations — The Company has purchase obligations with certain suppliers for the purchase of goods and services entered into in the ordinary course of business.

As of March 31, 2023, total outstanding purchase obligations were $ 25.7 million, the majority of which is due within the next 24 months .

Indemnification of Officers and Directors — As permitted by the Delaware general corporation law, the Company has included a provision in its certificate of incorporation to eliminate the personal liability of its officers and directors for monetary damages for breach or alleged breach of their fiduciary duties as officers or directors, other than in cases of fraud or other willful misconduct.

6 unchanged sentences

The Company accrues for losses related to litigation when a potential loss is probable, and the loss can be reasonably estimated in accordance with FASB requirements.

As of September 30, 2022, except as disclosed below, the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

On May 6, 2020, the Company initiated an arbitration proceeding with the Hong Kong International Arbitration Center against SMIC New Technology Research & Development (Shanghai) Corporation (“SMIC”) due to SMIC’s failure to pay fees due to PDF under a series of contracts.

The Company seeks to recover the unpaid fees, a declaration requiring SMIC to pay fees under the contracts in the future, and costs associated with bringing the arbitration proceeding.

SMIC denies liability and the arbitration is on-going.

As of March 31, 2023, the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

The Company seeks to recover the unpaid fees, a declaration requiring SMIC to pay fees under the contracts in the future (or a lump sum payment to end the contract), and costs associated with bringing the arbitration proceeding.

SMIC denies liability and an arbitration hearing was held in February 2023.

A decision is expected within this calendar year, approximately.

SUBSEQUENT EVENTS

Refer to Note 7, Employee Benefits Plans , for the discussion about the amendment to the 2011 Stock Incentive Plan.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements